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Commercial Email and Do Not Call Update

Client Alerts/Reports May 2004

FTC Files First Two CAN-SPAM Actions

The Federal Trade Commission announced that it has filed two enforcement actions alleging violations of the federal CAN-SPAM Act.

The FTC filed a complaint, with the cooperation of the U.S. Attorney’s Office in Detroit, the U.S. Postal Inspection Service and several ISPs, against Phoenix Avatar and four of its principals. The FTC had received over 490,000 complaints relating to commercial email linked to Phoenix Avatar which advertised diet patches. The FTC alleges that Phoenix Avatar violated the CAN-SPAM Act by not providing an opt-out method and by using third party email addresses in the “From” and “Reply To” fields, a practice known as “spoofing.” When email messages were undeliverable and bounced back, tens of thousands of undelivered emails bounced to the third parties, often flooding servers and interfering with business operations.

In the second enforcement action, the FTC filed a complaint against Australian company Global Web Promotions for spoofing emails advertising diet patches and human growth hormone products.

FTC Files First Do Not Call Action

The FTC also announced its first enforcement action alleging a violation of the Telephone Sales Rule for calling telephone numbers on the Do Not Call Registry. The FTC filed a complaint against National Consumer Council, a for-profit company masquerading as a non-profit debt negotiation group. The company called consumers who had registered on the Do Not Call Registry and left recorded messages claiming that they could stop creditors’ collection efforts. When consumers called to sign up for the program, the company failed to disclose monthly fees and other material terms, such as the debt negotiation services would not begin for six months after signing up.

Maryland Legislators Approve Commercial Email Bill

Maryland may update its commercial email statute by enacting H.B.1320 which targets high-volume emailers and repeat offenders. The Maryland House and Senate passed the Maryland Spam Deterrence Act which would outlaw falsifying transmission information, harvesting email addresses, and relaying commercial email through unauthorized computers. The Act would provide penalties of up to 10 years in prison and fines of up to $25,000, with the highest penalties reserved for high-volume emailers, repeat offenders, those who are leaders of three or more bulk emailers, and those who violate the law while committing a felony. Drafters of the bill indicate that it would not be pre-empted by the federal CAN-SPAM Act because it mirrors the federal law’s prohibitions, but provides higher penalties for certain violations. The governor reportedly supports the bill.

This client alert is a publication of Loeb & Loeb and is intended to provide information on recent legal developments. This client alert does not create or continue an attorney client relationship nor should it be construed as legal advice or an opinion on specific situations.

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